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We’re baaaaaack! US Manufacturing Costs vs. China …

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Despite earlier posts in which I highlighted the perils of focusing perhaps too enthusiastically on emerging BRIC markets, and others in which I spoke wistfully of such quaint notions as “the rule of law,” I am not – repeat, not – a China or other emerging market “basher.”

I’m just a realist, and my antenna go up when the crowd rushes headlong towards the next new thing.

There’s simply no doubt, of course, that the BRIC countries are the real deal. At the same time, it’s wise not only to remain mindful that the world continues to turn (i.e., business is being done) even in mature and stable markets, and that the best laid plans of mice and men actually do, from time to time come to fruition.

I have written and spoken in the past to the effect that NAFTA was all about supply chain integration and manufacturing efficiency. And I’m not the only one to have noted that as China becomes more prosperous, the costs of manufacturing there will rise. These two factors, taken together, could result in a resurgence of opportunities for American manufacturing.

Well, happily for American (indeed, N. American) manufacturers, this seems to be coming to fruition.

A recent piece in Manufacturers’ Monthly notes that China’s labor costs per unit are expected to overtake the United States in 2015. Citing a report by Hong Kong based investment group CLSA, cheaper energy produced domestically in the US (and, for all intents and purposes, in N. America) is dramatically reducing costs of production in the US.

Coupled with significant enhancements in manufacturing productivity in the US, and the continued integration of continental manufacturing (thanks again, NAFTA), rising prosperity in China and the availability of lower-cost energy in N. America points to a sustained recovery in manufacturing (though some remain skeptical in the face of the statistics.)

Manufacturing growth in the US can only be good news for the N. American economy as a whole … But, of course, every silver lining has a cloud.

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About the Author

Perry B. Newman is founder and principal of Atlantica Group LLC, an international business development firm, and an adjunct professor of international business at the University of Southern Maine. Newman writes and speaks widely on international business and policy matters. His column appears monthly in The Forecaster.